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Back to Search92% of infrastructure investors have identified ESG performance as instrumental for a clear long-term value creation strategy, while 82% of respondents expect scrutiny of ESG issues to significantly increase in the next three years.
In the last few years, ESG investment criteria have become a priority for infrastructure investors, with ESG impacting every stage of the asset lifecycle from origination to exit. Leading professional services company GHD, international law firm Bird & Bird and ITPEnergised recently partnered to carry out a survey of infrastructure investors, including investment funds, investment banks and developers, to gain insight into the UK and European infrastructure investment landscape, with specific focus placed on the role of ESG in decision-making. 60% of the organisations surveyed are headquartered in the UK, with the average infrastructure investment in the UK standing at around £3bn.
From a regulatory point of view, 46% believe that politicians/regulators are the top drivers of ESG in infrastructure projects, with 56% seeing regulatory requirements as the most important factor in pushing their organisation to have a wider consideration of ESG. However, a lack of clarity on standards is seen as the biggest challenge when making ESG-oriented investments, with 28% holding this view.
The survey also revealed that 72% of respondents broadly agree with the focus of the UK’s government’s ten point plan, although only 16% strongly agree and 12% disagree. The following were suggested as areas that should have been included:
- Solar power and investment into solar technology for industry
- Green initiatives directed at the agriculture sector
- Smart grid systems and solar PV across domestic functions
- Reforestation efforts
Other key observations from the survey are as follows:
- Over the next three years, 86% of European infrastructure investors plan to invest in transport infrastructure, 82% in social (educational, healthcare and aged care), 76% in communications, but only 68% in energy
- The highest proportion of respondents (42%) believe that telecommunication/digital infrastructure will be the most positively impacted asset type by behavioural change resulting from the COVID-19 pandemic
- 58% of respondents described the impact of COVID-19 on their business as significantly negative, while just 2% described it as significantly positive
- Reducing investment in UK and European infrastructure is a top three priority for 34% of infrastructure investors as a result of COVID-19, while increasing it is a top three priority for 29%
- 42% see UK becoming more desirable for inward investment post-Brexit, while 30% think it will become less so.
Tim Mawhood, Executive Director at GHD, said: “The government are clearly serious about the UK leading the pack when it comes to sustainability, but they simply cannot give with one hand and take away with the other. To deliver the ten point plan, a huge amount of investment will be needed, but hitting green energy organisations with a six percent hike in corporation tax will mean less money going towards offshore wind, network upgrades and all the other things we need to slash our carbon footprint.
When it comes to ESG, the investment industry is crying out for clarity. At the moment, it means different things to different people and the ambiguity isn’t helping. There is plenty of data out there, but investment will only have the teeth needed to make a genuine impact on our world if we know exactly what environmental and social benefits we need to achieve. It’s not an easy thing to solve but a standardised approach to ESG to ensure everybody is working from the same textbook would be a welcome first step.”
Stuart Cairns, Partner and Co-Head of International Projects and Procurement in Bird & Bird, said: “As an international law firm operating on all continents, we have witnessed first-hand how important ESG is to our clients and their investment decisions. ESG is no longer a “nice to have” but rather it has become a business imperative, driving this decision-making for clients in all sectors, markets and geographies.
“As a firm whose ambition is to be the number one law firm in the world for businesses being changed by the digital world, we are ideally placed to support clients on this journey, particularly as so many of the emerging trends and solutions are founded on digital technology.”
Andrew Bright, Director, ITPEnergised, commented: “The big thing that investors want is clarity. The ESG landscape can be seen as nebulous and is quickly changing. The survey results support this and we see this on a day to day basis in terms of the work we are doing with our clients. This combination of accelerating change and unclear expectations or standards can be difficult to navigate. As 82% of survey respondents expect a significant increase in the scrutiny of ESG issues in the next three years, clarity will be fundamental to success – but exactly what issues investors need to focus on and how investors can best measure, manage and improve these issues is challenging.
For further information contact:
TB Cardew (PR Advisors)
Alycia MacAskill / Charlotte Anderson
M: +44 7876 222703 / +44 7827 023678
E: ghd@tbcardew.com ;
W: www.ghd.com
About GHD:
GHD is a leading professional services company operating in the global markets of water, energy and resources, environment, property and buildings, and transportation. Committed to a vision to make water, energy and urbanisation sustainable for generations to come, GHD delivers advisory, digital, engineering, architecture, environmental and construction solutions to public and private sector clients. Established in 1928 and privately owned by its people, GHD’s network of 10,000+ specialists are connected across 200 offices located in five continents. www.ghd.com
About Bird & Bird LLP:
Bird & Bird LLP is an international law firm which supports organisations being changed by the digital world or those leading that change. We combine exceptional legal expertise with deep industry knowledge and refreshingly creative thinking, to help clients achieve their commercial goals. We have over 1300 lawyers in 29 offices across Europe, North America, the Middle East and Asia Pacific, as well as close ties with firms in other parts of the world. If you want to find out more, www.twobirds.com.